How to triple your investment with one decision

A genius investment

What if I was to tell you that there is an investment product out there that would guarantee that you could more than double and in some cases triple (or even more) immediately upon making the investment and continue to grow from there on. There is a small catch though. You would have to commit to keeping your money locked away for a pre agreed and extended period. Would you believe me?

Is the investment too good to be true?

Don't believe me? You should because it exists. Unfortunately it's not considered very sexy or desirable. It's called a pension.

If you hadn't figured out where I was heading towards until now then you might be a bit surprised. A pension is normally considered by many as quite a boring investment. It certainly doesn't seem as exciting as property or a bit of online trading.

Nevertheless this is the truth. You return on investment from a pension is likely to be much higher than most other investment products. The reason why people ignore them is because they like to put off decisions like thinking about retirement.

Firstly, if you are living in the UK the government has legislated that employers must offer a pension matching scheme. Employers must match an employees contributions into a pension up to a maximum (determined by the employer). This effectively doubles your money on day one upon putting your money in a scheme.

In addition, you don't pay income tax on any amount of money invested into a pension. If you are a basic rate taxpayer you will save 20pence in tax for every 80pence put into a pension. If you are a higher rate tax payer you will save 40pence in tax for every 60pence put into a pension and so on and so forth. This tax incentive scheme mixed with the employee matching scheme can be extremely lucrative.

I myself sacrifice roughly £190 per month of my salary to put into a pension. This may seem like quite a lot, but I get a £640 contribution into my pension as a result. That's a 337% increase in my investment into the pension on day one. Where else can you get this sort of return.

Furthermore, the money is invested into equities and over a thirty year time span I expect to earn a strong return. The brilliance of the scheme is that not only do I earn a return from the money that I've invested but I gain interest on the additional contributions from my employer and from my tax savings too! It's a fairly certain guarantee to earn a strong return over a lifetime. I have been putting into a pension for four years and I have calculated that my annualised return (comparing the money I've put in verses the size of my pension pot today) represents a compound interest of 19.5% per year. Where else can you earn this sort of yield in a financial product? Certainly not in property, bonds, or cash and almost certainly never in trading or stocks.

Downsides to a pension as an investment

There are very few downsides to a pension. The big one is that your money is tied up until you are 55. However, I'm not sure this is a problem. If you were looking to invest in property or shares you should also be taking a long term view. In addition, the longer time span reduces some of the risk and forces you to ignore the fluctuations in your investment.

The only other downside is that you need to be active when you put into an employee matching scheme. Normally the default fund offers very low long term returns. The likelihood is that you will need to adjust your default fund.

Pensions are sexy

Want to double, triple your investment on day one? Then invest in a pension!

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